Transport companies must face risk of rising debt

Small and medium-sized transport companies are not protecting themselves from bad debt and 45 per cent of those polled, have no plans for unexpected debt, according to research from Bibby Financial Services.

Time spent chasing late payments and the growing effects of dealing with bad debt is costing small and medium-sized businesses in all sectors an estimated 286 million man hours and nearly £3.6 billion per year.

Of those that have planned for bad debt, 49 per cent rely purely on the threat of legal action, with nine per cent using their bank overdraft facilities, and 22 per cent said that they plan to cover the shortfall from personal savings.

David Robertson, chief executive of Bibby Financial Services, said: “It seems that far too many owners and managers in the transport sector are burying their heads in the sand, hoping that dealing with late payers and bad debtors will not happen to them. Unfortunately, however good the relationship with suppliers and contractors, the reality is that chasing payment and dealing with bad debt is a fact of business life which can strike any business at any time, however unexpected.

Robertson is urging the transport industry to consider the impact of late payments and bad debts and wants a revised system of dealing with them.

“Given that a lack of foresight and planning could lead to a real threat of business failure, reviewing provisions in place should be a matter of priority for small business owners and managers across the country.”